Topic: Should Ecuador return to the Sucre currency or keep the US dollar?

Argumentative essay
According to historian Roque Espinosa Ecuador was going through a crisis
before dollarization, the government had tried to stabilize the economical system but the
situation kept getting worst. By 1999 the inflation was 60% and the depreciation was
190%. The Gross Domestic Product got stagnant from 1997 to 1998, but in 1999 it
dropped to -7,3%. Unemployment had reached 56% of the population and 2/3 of
Ecuadorians lived in complete poverty. Also, the minimum wage was less than 53
dollars per month. Ecuador had a deficit of -1,5% and a public debt of 16.000 million
dollars (Espinosa). These and more factors lead the president Jamil Mahuad to the
decision of changing Ecuadors currency from Sucre to the dollar. Some people
consider that this is the worst thing that had ever happened to our country, but after the
dollarization the economical situation of Ecuador has improved. As reported by the
International Monetary Fund dollarization can benefit the development and deepening
of financial systems in small countries or those with weak currencies(Gulde, Hoelscher
and more).
The most common arguments presented against dollarization are that because
of national pride the Ecuador should go back to Sucre, since it is truly ours, also that
having the dollar as currency makes it impossible for our government to control the
shock in economy caused by external factors.
There is no place for sentiment-based decisions in economics, our leaders need
to do what is best for our country, that means choose what brings stability. According to
the economist Angel Mayorga the instability and lack of credibility of the Sucre affected
the solvency of the financial system of the Ecuador, this also caused the rise of the
interest rate and the prices of goods (Mayorga). Besides the Ecuadorians have a lot of

things to be proud of, for example the beautiful landscapes, the variety of culture and
art, these are the things that people should be trying to protect, and not what says on the
paper they pay their bills with.
It is true that with the dollarization our government cant apply some kinds of
policies, the one that causes most controversy is the monetary policy, it consists in the
injection of more money, printed by the Central Bank, into the banking system, so the
government can control the damage caused in economy by external factors. But as
stated by economist Jos Andrade those policies are not the best solution for these kinds
of problems, because the currency devaluation they produce brings contradictory effects
on the economy. There are other tools to solve the shock, for example a commercial
policy, it is a set of rules that are intended to change international trade flows (Andrade).
As said before dollarization has provided us with monetary stability, this
makes it easier to get international investment, and because of the confidence in the
financial system more people can start new long-term business, this way they create a
consistent growth of the countrys economy. Also the inflation and interest rates tend to
be similar to the currencys issuing country, thats why they are much lower than in
1999 (Andrade).
In conclusion, dollarization hasnt taken anything away from us, since we still
have tools to fix our economical problems. But it has given us the stability we didnt
have, also it helped to get the country out of the crisis it was going through. The people
that believe that we should go back to the Sucre cant see the benefits of having the
dollar as currency or dont know about them, otherwise they would be grateful that the
dollarization happened.
Cited Work
Andrade, Jos. Resumen de un estudio a fondo antes de la dolarizacin. Boletn de la

Koyuntura. n.p., 1 Feb. 2010. Web. 21 Nov. 2014

Espinosa, Roque. La crisis econmica financiera ecuatoriana de finales de siglo y la
dolarizacin. Exigibilidad de los Derechos Econmicos, Sociales y
Culturales. Universidad Andina Simn Bolivar, 2000. Web. 29 Nov. 2014
Gulde, Anne-Marie, et al. Financial Stability in Dollarized Economies. Occasional
Paper: Washington DC, 2004. Print
Mayorga, ngel C. La dolarizacin ecuatoriana. eltelegrafo.com. El Telgrafo, 10 Nov.
2011. Web. 21 Nov. 2014